It was March last year when David Cameron, then leader of the opposition, first started talking publicly about freezing the BBC licence fee, an idea that prompted squeals of protest from the corporation.

Now Cameron's government is locked in last-minute talks with BBC executives about a proposal that could force the corporation to pay for free TV licences for the over-75s, currently £556m annually, but set to rise as the UK population's age profile gets older.

That figure is already equivalent to a 15% cut in the £3.6bn annual licence fee. It certainly puts talk of a small reduction in the £145.50 annual levy into perspective. Implementing the plan would cost the same as BBC2's annual budget and close to the £604m the corporation spends on its nine national radio services and dozens of local stations combined.

The BBC is so keen to avoid footing the bill it is offering to pay the World Service's annual £272m-a-year running costs as frantic negotiations with the government continue.

The World Service is currently funded by a Foreign Office grant that was set to be slashed by between £70m and £90m as part of the chancellor George Osborne's comprehensive spending review tomorrow. The BBC would pick up the tab for funding either the free over-75s' licence scheme or the World Service from April 2013 for the remaining four years of its existing royal charter.

Government departments are about to see their budgets slashed by between 25% and 40%, with the Department for Culture, Media and Sport due to be one of the worst hit.

No wonder the culture secretary, Jeremy Hunt, wants the corporation to take its share of the pain at a time when his government is preparing a programme of unprecedented public sector cuts.

BBC executives accept that hiking the licence fee at a time of economic hardship would not play well with the public. But they can also argue that cost savings at the BBC do not help to reduce the budget deficit, regardless of how painful they prove.

The fact that the BBC is directly funded by the licence fee rather than through general taxation meant it was in effect shielded from the Whitehall budget cuts – and political interference.

By asking it to bear the cost of over-75s' licences, the government has found an ingenious way of squaring that circle. It would save the Department for Work and Pensions more than half a billion pounds a year and enable ministers to claim that the BBC is doing its bit to help put the nation's finances on a sounder footing.

Shifting the cost of paying for these TV licences to the BBC would also allow the government to dodge taking the blame for any future cuts to this subsidy – and leave the corporation to suffer the political fallout.

The principle of using the licence fee for purposes other than broadcasting or content production had long been resisted by the BBC, but by agreeing to pay for the cost of digital switchover in 2006 – albeit in exchange for a higher overall licence fee settlement last time around – a precedent was set. That may prove to be a strategic failure if the corporation now has to pay for over-75s' licence fees or the World Service.

Either option will hurt the BBC. There are currently 3.97m free licences for the over-75s, but that number will rise. The World Service is, at least, BBC-branded and could be funded, in part, through the profits made by BBC Worldwide, the corporation's commercial arm, which made more than £140m last year.